1-Aug-21 – The bargain rate mortgage boat is cruising down the Chicago River again, giving would-be home buyers and families seeking to refinance a chance to jump aboard and lock in a loan in a historic low 2 percent range.

On July 29, the interest rate on benchmark 30-year fixed home loans was 2.80 percent nationwide, up from 2.78 percent a week earlier, reported Freddie Mac’s Primary Mortgage Market Survey. So, the gangplank for borrowers hoping to lock in a record-low mortgage rate in the mid-2 percent range is still in place.

Two weeks ago, the benchmark 30-year loan averaged 2.88 percent. Only a few weeks ago, borrowers were paying more than 3 percent for the same loan. A year ago, lenders were charging 2.99 percent for 30-year fixed mortgages.

Meanwhile, 15-year fixed mortgages hit a record low average of 2.10 percent nationwide on July 29, down from 2.12 percent a week earlier. A year ago, the rate was 2.51 percent.

The average interest rate on a 30-year fixed mortgage was 3.02 percent nationwide at the end of June. It quietly slipped to 2.99 percent on July 1 and has been under 3 percent for the past five weeks.

“As the economy works to get back to its pre-pandemic self, and the fight against COVID-19 variants unfolds, owners and buyers continue to benefit from some of the lowest mortgage rates of all time,” said Sam Khater (left), chief economist at Freddie Mac. “Largely due to the current environment, the 30-year fixed rate remained below 3 percent for the fifth consecutive week while the 15-year fixed rate hit another record low.”

On July 28, the Federal Reserve said it is keeping its benchmark short-term rate pegged at nearly zero, where it has remained since the pandemic tore through the economy in March 2020.

Analysts said long-term mortgage rates are creeping lower because of falling interest rates on 10-year Treasury notes, which was 1.26 percent on July 29. Earlier this summer, the Treasury note yield was 1.5 percent.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a 20 percent down payment and have excellent credit.

Record low is 2.66 percent on 30-year loan

Thirty-year fixed mortgage interest rates ended 2020 at a rock bottom 2.66 percent, the lowest level in the Freddie Mac survey history, which began in 1971. Home loan rates set new record lows for an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.

“If a home buyer has the best of everything – a 25 percent down payment and a 740 FICO score – the going rate is 2.75 percent on a 30-year fixed loan and 2.125 percent on a 15-year fixed loan,” said William Bren (right), Senior Mortgage Loan Officer at Huntington National Bank. The rates apply to conforming mortgages with a loan amount of up to $548,250.

Under an aggressive loan program involving a pledge of $25,000 in money market funds at Huntington Bank, North Side borrowers in many Chicago neighborhoods can lower these rates by 0.125 percent, Bren said. So, the rate on a 30-year loan could go down to 2.625 percent and 2 percent on a 15-year loan.

On July 29, Gateway Capital Mortgage in Chicago was quoting 2.66 percent on 30-year loans and 2 percent on 15-year mortgages with a 3 percent down payment, reported RateSeeker. First Savings Bank of Hegewisch was quoting 2.661 percent on a 30-year loan and 2.1 percent on a 15-year loan with 20 percent down payment.

Mortgage rate history

Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates in the 1960s were not much higher than the Great Depression, when lenders were charging 5 percent on five-year balloon loans.

Nearly six decades ago, between 1963 and 1965, you could get a mortgage at 5.81 to 5.94 percent. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6 to 9 percent range.

In the early 1980s, runaway inflation caused home loan rates to skyrocket. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.45 percent in October 1981 during that Great Recession.

Rates finally fell below 10 percent in April 1986, and then bounced in the 9-to-10 percent range during the balance of the 1980s. Twenty-two years ago, in August 1999, when some of today’s Millennial borrowers were in diapers, lenders were quoting 8.15 percent on a 30-year fixed mortgage. Back then, that seemed like a good deal. (Left) August 1999 cover of Vanity Fair magazine.